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The TSX was down by 0.59 per cent in early Friday trading on weakness in mining and tech.

The tech sector fell 2.8 per cent in line with the Nasdaq, which is down 24.3 per cent year to date as investors shift from narrative-based theses to more tangible metrics.

Materials lost 1.4 per cent on uncertainty over the sustainability of higher metals and fertilizer prices.

The market has given back some of yesterday’s gains after The Bank of Canada (BoC) raised its policy interest rate by 50 basis points on Wednesday for a second straight time. Its overnight rate now stands at 1.5 per cent, with Deputy Governor Paul Beaudry commenting on Thursday that it could rise to over 3 per cent to alleviate persistent pricing pressures.

Signs abound that the Canadian economy is overheating. Imports jumped 7.7 per cent in March to C$61.1B, substantiating healthy demand, but also how international goods are priced more affordably than local ones.

Grocery prices rose 9.7 per cent YoY in April, the largest increase since September 1981, while gasoline has risen 36.3 per cent YoY.

Global food prices also remain near record highs, emphasizing grain, vegetable oil and fertilizer, due to lost production and the blockade of key Black Sea ports stemming from Russia’s ongoing invasion of Ukraine.

To keep up with rising costs, Canadians upped their monthly credit card spending by 17.5 per cent in Q1 2022, according to Equifax.

However, higher rates are already having an impact, most notably with GTA home sales decreasing by 38.8 per cent YoY in May and by 9 per cent from April. This marks two consecutive months that sales were down monthly and annual. The average home sale price has also declined for three straight months. 

Similarly, Vancouver home sales were down almost 32 per cent YoY in May and down 9.7 per cent from April.

The consensus is that the BoC is preparing for another half-point hike at its July 13 meeting. However, it is unclear how hawkish it will have to be to corral the nightmare combination of low unemployment, high job vacancies and April’s 6.8-per-cent inflation.

In the meantime, oil is set to mark a sixth straight weekly advance on falling U.S. crude stockpiles and a modest OPEC+ output increase of just 0.4 per cent of global demand.

The commodity has been on a six-month rally, the longest in over a decade, prompted by less stringent COVID restrictions, including the easing of Chinese COVID lockdowns and the shunning of Russian supply, including the E.U.’s recent agreement to partially ban oil imports from the bellicose nation.

As markets adjust to rising input costs and central banks focus on alleviating them, investors should consider diversifying into consumer staples and firms with pricing power where demand is more likely to remain undeterred. Tangible assets like metals and real estate are also a potentially viable option to benefit from inflation, which may linger longer than expected due to geopolitical tensions and the pandemic’s continued effects.

The TSX is down by 0.75 per cent as of 10:54 am EST. It’s holding onto 0.19 per cent gains for the week, which would be its third straight in the green.

The Canadian 2-year bond rose to 2.8 per cent after the BoC’s rate hike on Wednesday, which is just short of its highest yield since 2008.

Market movers

Since Tuesday’s market summary, our investor community has gravitated toward firms in mining, industrials and tech that are fortifying their offerings with top talent and exciting new projects:

Desert Mountain Energy has appointed Marta Hodan Wasko as VP of Geology.

PyroGenesis will introduce plasma torches into the aluminum upstream anode baking process.

Finally, Drone Delivery Canada has implemented the first fully operational commercial drone delivery service at Edmonton International Airport.

Capital raises announced in the latter half of the week include Minnova, Stellar AfricaGold, StrategX Elements, Ultra Lithium, Seahawk Gold, Blue Star Gold and York Harbour Metals.

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